PayPal Shares Dropped Nearly 6 Percent as Company Warned About Bleak Holiday Quarter

 



PayPal said lower- and middle-income households had started reducing non-essential spending.


After the industry leader in digital payments trimmed its annual revenue projection and warned of a dismal holiday quarter as customers cut down on discretionary spending, PayPal Holdings shares fell by close to 6 percent in morning trade on Friday.

Consumers' purchasing power has been impacted by decades-high inflation while simultaneously being threatened by an impending recession.

According to Wedbush analyst Moshe Katri, "consumers have been switching from high-end, pricey goods to more reasonably priced ones while also spending more on non-discretionary products."

According to PayPal, lower- and middle-income people have begun cutting back on non-essential spending as a result of rising food, electricity, and petrol prices.

The company's circumspect remarks reveal its increased sensitivity to and exposure to discretionary expenditure, according to Katri.

In a conference call with analysts, Chief Executive Daniel Schulman stated, "Given a challenging macro climate, declining e-commerce trends, and an unpredictable holiday shopping season, we are being properly prudent in our Q4 revenue guidance."

The San Jose, California-based business lowered its prediction for 2022 adjusted revenue growth to 10% from prior projections of 11% while also predicting dismal fourth-quarter e-commerce growth.

The National Retail Federation (NRF) earlier this week predicted Christmas sales, including e-commerce, would increase at a slower pace this year even as retailers offer high discounts to entice customers and get rid of surplus inventory. That prediction was in keeping with their commentary.

"E-commerce remains in perilous territory with trends deteriorating through the quarter and an unclear background, increasing the probability that not much improvement may emerge next year," KBW analysts stated in a report and cut the price objective on the company to $95 from $115. (nearly Rs. 9,400).

After the results, at least 11 additional brokerages, including JP Morgan, Wedbush, and Jefferies, cut their price estimates.

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